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Special Report

Financial Markets

June 2022

Fed Increasingly Aggressive in Effort to Curb Inflation;
Rising Interest Rates Form Headwind for Real Estate Borrowers

Fed executes steepest rate hike in decades. At its June 15 meeting, the Federal Open Market Committee (FOMC) raised the federal funds rate 75 basis points to a target range of 1.50 percent to 1.75 percent. This was the largest single increase since November 1994 and brings the total year-to-date advancement to 150 basis points. Additional rate hikes are anticipated through the rest of the year, likely lifting the year-end target range into the 3.50 percent zone for the first time since before the Global Financial Crisis. These actions are applying substantial upward pressure to short-term interest rates. To lift longer-term rates, the Fed has also initiated quantitative tightening. The central bank is reducing its balance sheet at a measured pace of $47.5 billion per month from June to August, before accelerating to $95 billion beginning in September. The plan could adjust if economic risks shift.

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